If there is a day for wheat
to stage some sort of a recovery from its longest losing streak in two decades,
then today looks as good as any.

Tuesdays have a reputation for bringing turnarounds in Chicago,
if only temporary ones.

And Chicago sure has a strong trend to reverse, with the best-traded
July contract closing lower on Monday for the ninth successive session for the
first time since March 1994.

(It was also the 17th lower close in 18 sessions.)

'Too little, too late'

Furthermore, there is some fundamental cause for traders to
get a little more excited over the grain, with US Department of Agriculture
data overnight showing that the heavy rains in the southern Plains have yet to
cause much of an impact in terms of reviving winter wheat condition.

The proportion of US winter wheat overall rated "good" or "excellent"
stayed at a lowly 30%.

Has the precipitation come too late? USDA scouts in Oklahoma
said that, in the panhandle and south west areas, rainfall was "unfortunately
too late to revive the winter wheat crops and too little for much improvement
to subsoil moisture".

In fact, in Kansas, the top wheat-producing state, the proportion
of crop rated poor or very poor nudged 1 point higher to 62%.

'Concern is growing'

Meanwhile, harvest time rains carry the threat of bringing quality
downgrades to a crop for which current reports are already mixed, although the
stress from drought is generally seen as reflected in firm protein levels.

"Early hard red winter wheat yields in northern Texas are
reportedly anywhere from 5-25 bushels per acre," CHS Hedging said, noting that the
poor crop was already raising some fears over a knock-on effect for the next
crop.

"Concern is growing over poor seed quality for next year,"
the broker said.

Besides, there are still jitters over weather in the former
Soviet Union, which is proving too wet in parts of Ukraine, and too dry in
parts of Russia.

Export data

Furthermore, on demand, US wheat exports in the week to May
29, as measured by inspections, were a respectable 514,667 tonnes, if only
taking the total for 2013-14 (with two days to go) to 31.25m tonnes, 1m tonnes
below the figure the USDA has forecast for the season.

Still, orders are not exactly free flowing, when US prices
are still above those in other geographies.

"End users may be providing some bids on lower trade, but
haven't been inclined to be aggressive buyers," said Brian Henry at Benson Quinn
Commodities.

"Cash isn't offering incentive to the trade to buy futures."

'Funds liquidating'

And, technically, while there is plenty of comment on the "oversold"
nature of the US market, that is not stopping hedge funds selling down further
their net long in wheat derivatives, a position no longer looking so
profitable.

Given that prices are below all major moving averages, that
suggests heavy losses to investors who have held on.

"Funds were estimated sellers of 3,000 Chicago wheat
contracts on the session and continue to liquidate long positions in Kansas City
and Minneapolis," Mr Henry said.

'More inclined to
dump wheat'

At Chicago broker RJ O'Brien, Richard Feltes urged investors
to "be mindful that managed futures as a sector has lost money the last few
years including 2014 year to date, thus their tolerance to watch losing positions
post additional losses is limited at best".

"Importantly, managed fund longs in corn and wheat are well above late-May levels of the last two years,"
while at a similar level in soybeans.

"I conclude that managed funds will be more inclined to dump
wheat and corn longs in the coming days than cutting their soybean longs, which
are not oversized relative to the last two years."

Certainly, in wheat, Chicago's July soft red winter wheat contract
dropped 0.4% to $6.18 ¼ a bushel as of 09:30 UK time (03:30 Chicago time), with
Kansas City hard red winter wheat for July eased 0.3% to $7.16 ¾ a bushel.

'Astronomical condition'

Corn was indeed lower
too, by 0.6% to $4.62 ½ a bushel for the July contract, and by 0.7% to $4.55 ¼ a
bushel for the new crop December lot

The overnight USDA crop progress data hardly gave funds much
cause to buy, with planting 95% complete as of Sunday, in line with the
average, and the proportion rated "good" or "excellent" at 76%, a figure above
expectations and termed "astronomical" by Benson Quinn Commodities.

"Given this data, the only reason for the market to rally
would be to separate traders from their margin money," Mr Henry said.

The US export data were a little soft too, at 976,061
tonnes, below the weekly pace needed to meet USDA forecast for the full
2013-14.

Too much of a good
thing?

And US growing weather has been seen as broadly favourable,
and is expected to continue so.

"There were some isolated areas that received up to 6 inches
of rain over the weekend in the northern Corn Belt and probably will be
switched" to other crops, CHS Hedging said.

"But in general the moisture was welcome in the Midwest."

In Iowa, Mike Mawdsley at Market 1 said that "rain makes
grain. Sometimes it makes ponds.

"Some totals around my local area were 4, 5, even 6+ inches.
Now we hope no more rain falls until those ponds drain away."

Rapid planting

Even soybeans dropped,
little helped by USDA data showing 78% of the US crop planted, up 19 points
week on week, and ahead of the average of 70% (besides beating market
expectations).

Chicago's July contract fell 0.7% to $14.90 ½ a bushel, and
the new crop November lot by 0.4% to $12.25 a bushel.

The oilseed was little helped by a fall of 0.7% to 4,556
yuan a tonne in the January soybean contract on China's Dalian exchange
overnight.

That said, the consultancy was more downbeat on the newly
harvested crop, putting it at 86.6m tonnes, below the USDA's 87.5m tonnes.

And, on soyoil,
they reckoned that increases in the biodiesel mandate would lift consumption to
2.24m tonnes this year and 2.7345m tonnes next year, from 1.95m tonnes last
year, besides reducing exports of some 1.3-1.4m tonnes a year.

Cotton revives

Among soft commodities, cotton
rose 1.1% to 87.42 cents a pound for July delivery after the USDA data showed
US plantings remaining behind the average, at 74% complete compared with the
typical 81%.

The lag was marked in drought-hit Texas, the top US cotton-producing
state, where sowings were 13 points behind normal, at 62% finished.

And the condition of the Texas crop which has been seeded,
while better than last year, isn't great, with 35% rated "good" or "excellent"
by USDA scouts in their first rating of the year.

Furthermore, there is some expectation of a return drier
weather ahead.